HOA Rules and Regulations: What to Know Before You Buy

Home Ownership Costs, Mortgages
HOA Rules: What to Know Before You Buy

Carrie Fuca’s yard is skillfully manicured. Red begonias and Indian hawthorn frame the picture windows of her white brick ranch home. But keeping that look takes a lot of power tools. So Fuca bought a sturdy, weatherproof double-door shed to stow the lawn mower and garden supplies.

However, the homeowner association for her upscale neighborhood in Harrison Township, Michigan, said the shed violated deed restrictions — and threatened to sue her and her husband if it wasn’t removed. Unintimidated, Fuca sued the association first. You see, she has a bit of experience in a courtroom: Fuca is a district court judge.

But not even esteemed judges are immune to HOA authority.

HOAs: Neighbors backed by law

“I don’t think I did anything wrong. I don’t think it’s fair what they’re doing,” Fuca told her local newspaper, the Macomb Daily. Thousands of residents across the nation who have battled their own HOA’s regulations would likely agree.

Homeowner associations are formed to enforce architectural guidelines, maintain common areas and amenities and prohibit certain activities, uses and improvements. Their covenants are binding and legally enforceable.

HOA covenants can apply to single-family houses, condos or townhouses, from a cul-de-sac cottage to a Park Avenue penthouse. Wherever you’re thinking of buying, if the neighborhood is governed by the rules of an HOA, get all the details before making a final decision.

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What to look for in HOA documents

When buying a home, it’s a standard part of the loan process to receive details of the HOA’s “CC&Rs” — covenants, conditions and restrictions. You’ll want to make sure your real estate agent gets you the bylaws, board meeting minutes and recently published newsletters, as well.

What you’re looking for:

  • The HOA’s financial condition. When maintenance and repairs of common areas, property and equipment are ordered, the costs are shared by homeowners. If the dues and revenue generated by the HOA and placed in a reserve are sufficient to cover these costs, you’re all good. But if not, the HOA will order a “special assessment.” That’s an unexpected bill you and your fellow homeowners have to pay.
  • Ongoing issues. Disputes among homeowners and the HOA can reveal property matters that you might not be aware of. These issues might be simple — say, something involving repeated disturbances, noise or parking issues. Or the issue could be something even bigger — construction quality, major inconveniences or even financial malfeasance. For example, a Florida condo association recently resolved a matter in which a board member illegally paid himself hundreds of thousands of dollars in funds from an HOA, an issue that’s been ongoing for over 10 years.
  • Restrictions you might find difficult to comply with, such as those regarding pets, exterior paint colors — or garden tool sheds. An HOA can even forbid an owner from renting out his property.

And, of course, you’ll want to determine how much the dues are, how frequently they’re paid (monthly, annually, etc.) and whether they’re raised on a regular basis.

The case of the unsuitable shed

“I think we all want to achieve the same goal, maintain the integrity of the subdivision,” Carrie Fuca, the judge involved in the ongoing case of the unsuitable shed, told the local newspaper. “My shed does preserve the integrity of the neighborhood because it hides the lawn mower and gas cans.”

HOAs are formed to protect property values — and sometimes aesthetic tastes as well. Knowing the rules before buying can mean avoiding disputes that can be costly and time-consuming.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick.


Image via iStock.